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Archive for Thursday, October 27, 2005

Traveling costs expected to climb

October 27, 2005

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Steep fuel costs, low supplies of airline seats and hotel rooms, and growing travel demand will push prices higher on airfares and hotels next year, according to the American Express 2006 Global Business Travel Forecast.

For U.S. business fliers, airlines' reduced schedules and high fuel costs will push airfares up 5 percent to 8 percent on domestic economy-class flights, and up 2 percent to 6 percent on international business-class fares, according to the forecast.

Rising demand and a limited number of new hotel rooms will drive higher-end hotel rates up 2 percent to 5 percent and midrange hotel rates up to 3 percent higher in the United States.

Car-rental companies are likely to charge as much as 7 percent to 8 percent more as they face steeper costs related to maintaining their fleet, said Matthew Davis, director of global consulting at American Express.

"(Overall,) this is a more aggressive forecast than last year. We've got very, very strong demand on long-haul flights, particularly to destinations such as Asia," he said.

Companies' penchant for outsourcing, Davis said, "is driving strong demand across the globe."

While demand is helping make higher prices possible, steeper fuel costs may be making them a necessity. Airlines hedge against fuel costs, but they can only do that for "a certain period of time," Davis said.

And travelers shouldn't expect much in the way of price relief from low-cost carriers: Fuel often is a bigger percentage of their overall costs than it is for traditional carriers.

Even the rash of bankruptcies among big U.S. carriers won't ease the hit to travelers' pocketbooks.

Quite the opposite, said Prashanth Kuchibhotla, a senior manager with American Express' eClipse Advisors.

"In bankruptcy, the carriers rationalize and streamline and become more efficient," Kuchibhotla said.

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